For a very long time, estate plans didn’t change much. Traditionally, they have been paper documents that spell out a person’s wishes regarding property, executorships’ responsibilities, funding of trusts, and so forth, that were spelled out in wills, trusts, powers of attorney, health-care proxies, and perhaps invoking the Homestead […]
Most clients and advisors are acutely aware of the value of a thoughtfully designed estate plan that provides for the eventual disposition of a client’s tangible and financial assets. Despite this, even the most carefully constructed estate plan often overlooks a client’s digital assets.
In today’s society, almost all clients are active online, and may have substantial digital assets with both sentimental and monetary value even if they do not realize that this is the case. Without a clear plan that specifies the client’s wishes, however, both state and federal laws can create roadblocks to accessing digital assets—making it critical that the client include digital assets in any comprehensive estate plan in order to ensure an orderly post-mortem disposition that carries out the client’s wishes.
Uniform Laws Governing Digital Assets
The concept of estate planning for digital assets actually covers an extremely broad range of online assets, ranging from email accounts and social media to PayPal, domain names, intellectual property stored on a computer and virtual currency. While some of these accounts are likely to have only sentimental value, domain names, blogs with advertising and business contact lists contained in email accounts can have monetary value, as well.
Without a clear estate plan contained in legal documents, data privacy laws can prevent the online service provider from allowing the client’s executor or family members to access his or her online accounts. The Uniform Fiduciary Access to Digital Assets Act, which has been passed in most states, provides that an owner of digital assets can specify who will be able to access and dispose of any digital assets after death.
Absent proper planning, the online provider’s terms of service agreement (TOSA) will often control what happens to the account after death. In some cases, this TOSA can even override the client’s specifications that are contained in a will or other document, especially in cases where the service provider provides specifications as to how the account owner can make his or her post-mortem wishes known.
For example, Google provides an “inactive account manager” function that allows the account owner to specify what should happen to the account after it has remained inactive for a period of time. The account owner can list beneficiaries who will be notified that the account will be closed before it is deleted, giving beneficiaries time to download any content contained in the account.
It is important to remember that the instructions the client leaves in his or her online service provider’s tools will trump instructions left in the will, so it is important to include this document among those that should be regularly considered and updated.
An Action Plan for Digital Estate Planning
After a client determines who should be allowed access to his or her digital assets after death, it is important to takes steps to ensure that the heir is able to access the relevant data. Importantly, the client’s will, trust documents and other legal documents should specify a digital fiduciary or executor who will be able to access any given digital asset after death, and should also provide that individual with the ability to reset or recover the client’s passwords.
In order for such a plan to be effective, the client should be advised to make a comprehensive list of his or her digital assets during life, which should also include instructions as to how the appointed person can access those assets after death. To facilitate easy access, the client should list usernames, passwords and the security questions associated with the account password. This information should be stored securely, but should not be included in the client’s actual will, which can be accessed by the public after death.
Depending upon the type of digital assets involved, clients may find a virtual asset instruction letter valuable in their digital estate planning. This letter sets forth all relevant information as to digital accounts and assets to allow the digital fiduciary access (or instructions that certain accounts should be deleted).
Clients should also be advised to regularly back up their digital assets on the cloud or another device, both to protect those assets from a device malfunction but also to allow easier post-mortem access to a digital fiduciary.
A client’s digital estate plan will vary in complexity depending upon the type of digital assets involved. Many clients may be unaware that their digital assets hold monetary value, so it is important that the advisor discuss disposition of digital assets with all clients, even those who do not initially foresee the need for digital estate planning.
Digital property is increasingly becoming a more important part of estate planning. Individuals should consider their digital property, in addition to their tangible assets, when finalizing and reviewing their estate plans.
A person’s digital property and electronic communications are referred to as “digital assets” and the companies who store those assets on their servers (Google, Facebook, Apple, etc.) are referred to as “custodians.” Digital assets are typically governed by terms of a service agreement — not by property law. These service agreements are unhelpful when a user passes away or becomes incapacitated. As the number of digital assets we have increases daily, so does this growing issue. To address this, many states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (UFADAA), which allows a fiduciary the legal authority to manage another’s property and specifically allows Internet users the power to plan for the management and disposition of their digital assets.
Digital assets should be included in your normal estate planning and wealth transfer conversations with your estate planning attorney and family members. Your estate planning attorney may create an amendment to your existing will, trust, or power of attorney to give the designated agent the authority to direct or dispose of your digital assets. This amendment may take the form of a Virtual Asset Instruction Letter, which allows you to list accounts, instructions for those accounts, and the person(s) designated to access them.
Digital assets, while not always tangible, can be very valuable. For example, airline miles and hotel points have obvious monetary value, while photos, emails, and other creative works have sentimental value. As a result, it is important for individuals to have a plan for photos, email and social media accounts, financial accounts, and online memorabilia and documents.
Please contact us to request additional resources on creating a digital estate.
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After hearing the words “estate plan,” some people may think of a will or a trust. These are important legal documents, but there is so much more to consider when thinking about estate planning.
When considering how complex estate planning can be, it is understandable that some elements may be overlooked. While the following components are often forgotten, their importance should not be minimized.
We like to think that we’re invulnerable, but we’re all susceptible to facing a serious injury that could leave us incapacitated. Having a living will gives you the power to specify which types of end-of-life medical care you want to receive. Naming a power of attorney allows you to choose someone to make medical and financial decisions on your behalf if you’re unable to do so on your own.
Choosing the best executor
The executor is the person responsible for settling your estate after your death. This is an important role, and it is something that should be carefully considered when naming someone. Some families simply choose their oldest child to serve as the executor of their estate. The oldest child may be the best person for this role, but that isn’t always the case. Rather than defaulting to someone, look for someone with a good temperament and is willing to carry out the responsibilities of the role.
Digital asset planning
As technology advances, our lives are becoming increasingly digitized. While people often remember to include their non-digital assets in their estate plan, many people are forgetting to plan for their digital assets, too. Digital currencies and files that are stored on your computer, including photos and music, should be included in your estate plan. Having a list of passwords that will allow people to access your accounts after your death is also a good idea.
Regularly reviewing beneficiary designations
When you opened a retirement account or purchased a life insurance policy, you were likely prompted to name a beneficiary. These beneficiary designations specify who is entitled to receive the money in your account or the death benefits on an insurance policy if you die. The beneficiary designation will trump what is written in your will, so it is critical that the designation is up to date.
Estate planning is about so much more than simply deciding where your belongings go after you die. A complete estate plan should protect your finances, your family and your independence. Ensuring these four elements are part of your estate plan can help you accomplish those goals.
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